Pharma Partnerships for Covid-19 Vaccine: Just a Fling or Forever?
Over the past year, Big Pharma proved what the industry can achieve when it works together. Major pharmaceutical companies have set aside their differences to produce the Covid-19 vaccine. Instead of competing over disease treatments and high dollar medications, pharma players turned from foe to friends during the pandemic. Up and down the supply chain, big names in the pharma industry are teaming up to meet Covid-19 vaccine production demands. (Lopez, Bloomberg).
Whatever their motivations – humanitarian or the multi-million-dollar market – every pharma company wants a piece of the Covid-19 vaccine efforts. Companies whose initial vaccine efforts failed, such as Merck & Co. and Sanofi, have partnered with Johnson & Johnson and Pfizer Inc., respectively, to help ramp up vaccine supply. (Lopez, Bloomberg; Hopkins, Wall Street Journal). Novartis AG is working with Pfizer Inc. to fill vials quicker and to develop the mRNA needed for a new vaccine candidate produced by CureVA NV. (Lopez, Bloomberg). Moderna also entered into deals with Catalent Inc. and Baxter International Inc. to help fill vaccine vials, and Takeda will use an existing facility in Japan to manufacture, import, and distribute vaccines. (Lopez, Bloomberg; Moscicki, PhRMA). Some failed vaccine developments left companies with empty production lines and equipment, but other partners are starting from scratch and must install the necessary equipment for the complex vaccine-making process. (Hopkins, Wall Street Journal). As of February 2021, seven different vaccines have been developed and 670 million vaccines have been administered worldwide. (World Health Organization).
So, what will become of these partnerships when vaccine demand dissipates? James Bruno, a pharma consultant, stated, “This is a time when the pharma companies are saying, ‘We’ll go back to fighting when this is over … [R]ight now we need to be working together.’” (Hopkins, Wall Street Journal). Arti Rai, director of Duke Law’s Center for Innovation Policy, echoes Bruno’s sentiments stating, “Getting competitors to team up is always hard.” (Lopez, Bloomberg). And companies must consider what existing product lines they will draw extra materials and manpower from. (Lee, Bloomberg). Rai explains that the public health crisis makes the moment ripe for partnerships but that this collaboration is rare in the industry. (Lopez, Bloomberg). She is “not aware of a situation where [companies have] contracted for manufacturing capacity that might never be used [again] or might be repurposed.” Id. Yet pharma companies are working around the clock to increase manufacturing output and speed up distributions around the world. (Moscicki, PhRMA).
Although these partnerships are very worthwhile efforts to produce and distribute Covid-19 vaccines, the desire to continue the partnerships may dwindle as the demand for vaccines flattens. Manufacturing partnerships on a global scale are cumbersome. (Lopez, Bloomberg). Logistics, domestic and international tax implications, and intellectual property rights often make global manufacturing agreements more of a headache than they’re worth. Id.
However, other industry experts believe the Covid-19 vaccine efforts have proved the value of partnerships in the pharma industry. (Agrawal et al., McKinsey & Company). Maria Laccotripe Zacharakis, a partner at McCarter & English LLP, expects to see growth in large-scale manufacturing partnerships now that companies have experienced the synergies and efficiencies resulting from the partnerships. (Lopez, Bloomberg). Partners from McKinsey & Company, a global consulting firm, also believe the pharma industry will undergo a dramatic shift as a result of the pandemic. (Agrawal et al., McKinsey & Company). “Over the course of the past year, the biopharma industry has effectively rewritten many of the implicit rules by which it operates. Now is the time for companies to step back and reflect on how much has changed—and on what new factors will shape their decisions and actions in the years ahead.” Id.
Covid-19 vaccine partnerships may also be a catalyst for merger and acquisition (“M&A”) activity. Before the Covid era, healthcare M&A was skyrocketing [1] and the pandemic has highlighted the need for a stronger, more efficient healthcare industry. (LaPointe, RevCycle Intelligence). Over the past decade, the pharma industry alone has completed hundreds of deals worth $1.6 trillion. (Sagonowsky, Fierce Pharma). However, the Federal Trade Commission (“FTC”) revamped its Merger Retrospective Program which may make M&A in healthcare, and specifically pharma, more burdensome. (Federal Trade Commission). Rebecca Kelly Slaughter, the FTC’s acting chairwoman, stated, “it’s an appropriate time to look at pharma M&A.” (Sagonowsky, Fierce Pharma). The agency is concerned with anticompetitive behaviors exhibited by the industry such as “price-fixing by generics, pay-for-delay settlements, and product hopping.” Id. In order to block a merger, the FTC must convince a federal judge that the merger would reduce competition. Id. Thus, the FTC is expanding and formalizing the Bureau of Economics’ research efforts to bolster their data and success. (Federal Trade Commission). The FTC’s intent in regulating pharma is to ensure innovation can reach patients at affordable prices. (Sagonowsky, Fierce Pharma).
Will big pharma egos give way to consolidation, or will they continue to compete? Although Big Pharma’s collaboration over the past year has been heroic, the future of covid-related pharma partnerships is unlikely. Based on the difficulties posed by regulatory and manufacturing logistics, it is doubtful Covid-19 fueled partnerships between Big Pharma competitors will remain. The impacts of heightened regulation, manufacturing capacity, and the Covid-19 disease itself will shape the future of the pharma industry.
Footnotes
[1] In 2019, 92 healthcare transactions were announced versus the decade low of 74 transactions in 2010. (LaPointe, RevCycle Intelligence).